European Closing Thoughts 27/07/12

July 27, 2012 1:34 PM

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

First of all, the news that the US economy expanded at a slower pace in the second quarter was a no-news.

Why?

All the past macro-data was pointing to a slower growth rate, therefore expectations had already been lowered and if the reading had beat expectations by far the chance of a Fed intervention would have been reduced.

US GDP rose at 1.5% annual rate after a revised 2% gain in the prior quarter, the median forecast of economists surveyed by Bloomberg News called for a 1.4% increase. Softening job market impelled Americans to cut spending: household purchases, which account for abut 70% of the world's largest economy, grew at the slowest pace in a year. Household consumption rose at a 1.5% from April through June, down from a 2.4% gain in the prior quarter. The median forecast in the Bloomberg survey called for a 1.3% advance.

The real news of the day:

BN 07/27 13:20 *GERMANY, FRANCE: MUST IMPLEMENT JUNE SUMMIT CONCLUSIONS SWIFTLY
BN 07/27 13:19 *GERMANY, FRANCE DEEPLY DUTY-BOUND TO KEEP EURO ZONE INTACT
BN 07/27 13:18 *MERKEL, HOLLANDE: EU INSTITUTIONS, STATES MUST MEET COMMITMENTS
BN 07/27 13:16 *GERMAN CHANCELLERY COMMENTS IN E-MAILED STATEMENT
BN 07/27 13:16 *GERMAN CHANCELLERY COMMENTS ON MERKEL-HOLLANDE TELEPHONE CALL
BN 07/27 13:16 *MERKEL, HOLLANDE READY TO DO ANYTHING TO PROTECT EURO REGION.

For the first time it looks like there is an agreement between European politicians and technocrats that something should be done, but not later on, just Now.

Markets prized the statement:

Stoxx50 rose 1.67% to 2,288.55, German Dax gained 0.99% to 6,648.39, but the drivers were the Italian Ftsemib up 2.73% to 13,570.99 and the Spanish Ibex up 2.63% to 6,536.40.

Italian government bonds' yields fell 1.50% to 5.965, Spanish one declined 2.53% to 6.753.

Euro is getting stronger versus the greenback it was up 0.72% to 1.2372$, Oil(Wti) and Gold both in the green, the Wti rose 0.51% to 89.85$ while Gold gained 0.19% to 1,622.90.

US markets were following the European path all benchmarks were up between 0.60% and 0.93%, at this point the question is:

it's just short covering? or this time investors are betting that the Fed and the ECB will be able to deliver what the market is now expecting?

We got the weekend to think about.

Have a great one.

Originally posted at www.77sigmatrading.com